PESN: Update on Hurricane Katrina's Damage to the Gulf Oil Patch

It is not a pretty picture (in fact I would like to hear some critiques of this if there are any to be done.)

The linked article discusses the author's perceived repercussions of Katrina's impact on the Gulf oil infrastructure.  There are also some remedies discussed in the piece, including emergency spending on alternative energy technologies.  The article also discusses the ramifications on employment in other industries, agricultural production, etc.

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50% loss of natural gas would be the apocalypse made real.  Since most gas-fired power plants IIRC use turbine drivers, you might be able to crash convert them to use gasoline or kerosene, but you still wouldn't have enough for residential and industrial heating and synthesis use.

A possible complication with refinery restarts is that a large supply of nitrogen is required to purge the units.  This usually comes from a pipeline, onsite liquid, or mobile units.  If all of these are out then no start.

If this is all true why are prices for oil, natural gas and gasoline declining on the market?  I can understand that demand will be less but based on what this guy is saying I would think we'd be seeing $100 oil.
So, you implicitly trust the oil & gas markets to set realistic prices?
No, but if this guy knows all this information then a lot of greedy people out there in the oil industry know it and they'd be buying instead of selling to make a buck.
Natural gas has been around $11/MMBtu since Katriana -- unlike oil and gasoline, it has not come back down.  Last year around this time of year gas was between $5-$6.  Let's pray for a mild winter!
The natural gas situation is actually more interesting than crude oil.  Obviously it is not a "global market" (yet), so while U.S.-based industry is paying $11, those in the Middle East are paying $0.50.  This was hurting the gas feedstock U.S. chemical companies even before Katrina.  It's not only ammonia/urea, it is also methanol, ethylene, and all their derivatives.  

Now what is Katrina going to do to the LNG (liquified natural gas)projects? On the one hand, LNG is the only promise for a reduction in natural gas prices in the U.S.  On the other hand, the proposed regasification terminals lie in right in the middle of the Gulf of Mexico hurricane path.  (The answer to why there can be answered by the abbreviation NIMBY:  "not in my back yard" voiced by richer east/west coastal states.)  It is not clear if Katrina will accelerate the LNG projects because of the higher price, or will it slow them down.  

...interesting times :)....

oil is down because SPR and IEA have flooded the market with reserve oil.  although most of this oil is heavy sour, there is excess crude oil because there're not enough refineries to process them/convert them into distillates.

Gasoline is down because Europe is shipping over, i.e. also flooding the market with it.

Natural gas is down and i dont know why.  this is strange indeed.  may be i'm missing something.

all of this will change as we head into winter.  i am predicting early october.  expect all energy prices to break $70.

billyt is right, the use of the SPR is acting as a buffer between supply and demand (it was built for this very reason). Once the crisis will be over, you will have to fill it up creating extra pressure on the market.
According to the terms of sale (PDF) published by the DOE, delivery of SPR crude will not begin until October 1.  So is the buffer more psychological?  Or am I confusing spot and future again? :)
Too bad we can't edit our comments.

I was reading here about some oil that began flowing the first and second week of September.  So disregard my previous statement.  Thanks.

ExxonMobil has contracted for 6 million barrels, half sweet and half sour from the Bayou Choctaw storage site.  Oil began flowing on Saturday, September 3;
(more at link)
From the article: "The USA is a massive exporter of nitrate fertilizer to the rest of the world. We also use massive quantities of it. The exact tonnage of this is difficult to estimate but this loss of supply is enough to risk the loss of a very significant part of the world fertilizer supply. This is going to affect the supply of food in the world for about 2 years. This will not be a minor loss."

Farmers are really taking a hit on this. About 77% of the cost of ammonia fertilizer is due to natural gas. And the fall harvest and winter wheat planting are getting underway. There's no real relief in sight for natural gas either, the EIA in their most recent short term energy outlook see the price of natural gas going up to around $12/mcf by December for every single scenario vs the $9/mcf that it was in August.

Also with regards to the article, I didn't see him mention energy efficiency (or what I call conservation) at all when he was talking about solutions to the energy problem. North Americans just use way too much energy and they don't have to. It's crazy to be driving in the city at 20mph in a car that has a 120hp (90kW) engine when 500W does the trick.

I guess I need help from a geologist:

The dikes along the Mississippi river remain intact but most of the land adjacent almost into the city of New Orleans is gone.  This extends on a line almost to Morgan City.   There is some question if this is an extended “storm surge” (Note no such thing has been observed before) or if the area is permanently gone.  The area involved is about 2000 square miles.  The entire area of the state south of Baton Rouge is now in danger of sinking into the sea forever.   This includes some areas into the State of Mississippi and the ENTIRE CITY OF NEW ORLEANS.

There is some question if the 30-foot storm surge didn’t shift the land and cause the area to sink several feet.  This if so would be mass effects of the water on a porous geologic structure.  (The Oil industry caused the pores.)

This is the first I've heard that the land is or may actually be sinking / sunk.  I know that New Orleans has had a slow problem (since they began holding back the Mississippi from flooding about eighty years ago the Delta has not had any fresh silt) but did Katrina really cause a big shift?  Or is this guy just looking at standing water and assuming the land beneath it has dropped?  

Anybody know more about this?  Sorry, it's not really a peak oil related question, but it does relate to whether they will be able to keep a workforce in the area, I suppose.

The weight of accumulated sediment in a delta system as huge as the Misssissippi's depresses the crust.  He had it partly correct, without intermittant deposition of silts and clays by flooding, deltas disappear.  The periodic hurricane and endless wave action simply put the nail in the coffing by shaving-off the bits still above water.  He refers to "pores" as partly to blame for the inundation.  I assume he means the well bores of the many thousands of producing wells (plus many more dry holes).  It's highly unlikely that well bores alone are to blame - perhaps he's thinking regional subsidence caused by extraction of oil and gas???  In the 1920's Long Beach, California was at risk of inundation due to such extraction - only injection of water saved the day.

My first question has to do with itself.  I haven't really visited this website in the past, so my first question is what type of reputation do they have?  Are they fearmongers (like Kunstler), or do they tend to present a more level-headed view?
that's a good question ericy.  I skimmed their stuff a little bit, but not a lot.  That's why I posted it with skepticism and asked for debunking...but, it is an interesting picture he paints if we can't debunk it.
I think some of the numbers in this article are either seriously wrong or taken grossly out of context.

For instance:

  • He appears to say that the four refineries which are still out (and will be, probably for weeks at the very least) comprise 15-25% of U.S. gasoline production.
  • He says that 1/2 of North American natural gas is used to make fertilizer (or at least chemicals - he is a little unclear).

These don't seem to square with some of the other articles and posts I have seen on this site; however, I also have nothing to point at to say that they are wrong ....

Somebody with access to the numbers and/or time to do the research please help on this one - some verification and/or debunking may be useful for all of us in deciding how to react to this.

I was wondering the same thing (about PESN), when I spotted this line in the linked article: "Some 50% of the US Natural Gas supply is shut down due to pipeline damage and rig damage. This is the thing I was talking about in a previous posting to the PESN site when I referred to a Global Famine being a distinct possibility. It now is approaching certainty. Let us hope for the best."

Huh???  Global famine is "approaching certainty"?  I know nothing about PESN, but this line sounds a lot like they've let their assumptions run away with them.  

Just before posting this, I checked the prior posting referenced above, and it has this gem:

The President of the US is sleeping, unaware of the magnitude of the calamity that has happened. Inside info from the US Army Corps of Engineers reveals a damage area of nearly total destruction of 90,000 square miles. The permanently homeless here number about 7 million. The permanently unemployed are about 3 million. This situation is risking the collapse of the world economy. It is possible that those of us who lived through Katrina are the best off. I lived through it in North Alabama. We have wide spread damage but mostly minor here. On a "Fat Triangle extending essentially from Morgan City, La to Escambia County Florida, to a point about 100 miles south of Florence Alabama is nearly totally wiped out. Of course there are areas within this region which are OK, but in general the damage is very bad.

The duration of the problems here will be years.

The energy issues here represent a "World Wide Famine." This situation has endangered the survival of nearly one billion persons in the rest of the world. World War is almost certain to follow this.


we have to find a way to confirm that this is true:

  1.  50% of US's Natural gas production is shut down.
  2.  how much of that Natural gas is used to make nitrate fertilizer.
The one real red flag I noticed was his link to magnetic motors which is a crackpot scheme to get energy from magnets, in violation of the law of conservation of energy. The fact that he would take this seriously is a bad sign to me.
Here's another red flag:

"The US Income Tax left the USA mesmerized by "Just in Time" inventories for many years.  This caused the end of local stores of fuel. It consolidated the refineries. It ended the supply store with a stock of parts and left us living by an Air Bridge to Asia for our resupply.  Asia has come to believe in the instant continuous market in the USA.  This term "Just in Time" should in emergency be viewed as "Just Inadequate Treatment."  This applies to epidemic, fire, flood and terrorism.  The USA used to keep massive stocks of supplies for the cold war -- and does not have them now.  This left the US Military fetching supplies from all over the world just to handle a Hurricane.  The Income Tax must be repealed and replaced with the "Fair Tax" ( in order to return to having adequate supplies for emergencies."

Huh!!! That is totally incoherent ...

Although the article wanders off into wacko-land with the fair tax stuff, magnetic motors, and a couple other points, that does not necessarily invalidate his central arguments. Can anybody find problems with his numbers regarding fuel production, natural gas production, etc? I suspect (and am desperately hoping) that those numbers are wrong, but don't have the time to do the research myself.
I found a couple more red flags.  

They had a "gravity motor" - sounded like a perpetual motion machine...

Then there was using acetone as a fuel additive to improve fuel mileage.  I had seen this one discussed before, and this was also viewed as quackery.

There may be nuggets of truth in the article about the oil situation, but my inclination is to quietly back away from these folks, and let them play with their little machines.

I'll go along with the others on the link. and would like to add one more comment.  It seems they are pushing the "Fairtax"  B.S.  i've beem investigating this since it came out a couple of years ago, and believe my "YOU DON'T WANT THE FAIR TAX INITITIVE" to pass under any circumstances. If it goes through It will be curtains for pensioners like myself, and millions of others.   It' isn't fair at all.    Remember it cost The Donald the same price for a loaf of bread as I pay. If he doesn't want to buy that new BMW or 100' yacht, that's his choice, I can't even look at one.   It's nothing more than a national sales tax in discuise.
For what it's worth, their article here titled "Gulf Oil Disruption and Government Ineptitude" has this:

The farmers were scheduled to begin the cotton harvest this week which is a major demand of fuel supplies. A typical farmer will burn thousands of gallons of fuel during the harvest. Harvest is on a natural clock. It cannot be held. This is a very substantial part of our food supply at risk here. Cotton seed is food. Cotton fiber is clothing etc. The seed is 50% of the crop.

A very quick Google News search shows a score of articles such as this one, all of which echo the refrain "In its monthly crop report, the Agriculture Department raised the forecasts for cotton, rice, soybeans and corn over last month's estimates. And though farmers are expected to grow more sugarcane than in 2004, the department lowered the production forecast from last month." and "Nationwide, cotton production is forecast at 22.3 million 480-pound bales, up 5 percent from last month's forecast but down 4 percent from last year's record production. If the trend continues, this year's crop would be the second-best on record, the department said."

Cause for alarm?  Not so sure.  Yes certain individuals will be harmed, no doubt.  But that happens every year.  This is cotton farming we're talking about.

He makes this dire prediction:

Here is how it runs, You see about 4 days more and the inventory in the grocery stores etc will be running out. (For those reading such posts who cannot think, this is a current condition forecast and could be changed if things are dealt with properly) Currently the gasoline we are being shipped is reserves from the refinery stocks pre-storm. These will run out in about 4 days. Then we see a complete shut down and serious civil and other disruption. Most of the people where I live are pretty decent folk and I expect them to pull together but this is most serious. If no food comes to the stores and the plants stop shipping one sees loss of jobs and loss of life.
in an article dated six days agao...
According to an article in the Fall Church News-Press, a weekly paper which serves an elite DC suburb where many policy makers live, Tom Whipple wrote an article  The Peak-Oil Crisis:  The Storms of August, Sept. 8-15 issue,  in it he also states "there will be unprecedented natural gas problems this winter...there will most likely be serious shortage."  As for gasline, he states that "it takes approximately 20 days for a barrel of oil to poput in Virgina once it has entered the pipeline."  According to a press release the Colonial pipeline was restarted on Sept 3. with anticipated 80& capacity that night and 100% by the end of the weekend.  Assuming this is correct on both counts, starting Sept. 23 we could experience some shortages unless the EU's gasoline arrives and is put in the pipeline before then.  From what I have read, the four refineries that are out of commission (and will be for sometime, at least through the end of the year) produce 850,000 barrels a day and the amount of gasline coming from overseas will be approximately 340,000 barrels a day for 30 days. This still leaves us short.  
I think we will be in trouble eventually this winter, but oil bulls have seen something they had not in this 5 year rally. First signs of demand pull back. Crude will go higher but when Gasoline drops in line with NYMEX prices which is gonna be a big relief for every idiot with a SUV and they gonna start warming the planet at full speed.
After spending a little more time on the PESN site, plus reading the comments here, I have a couple of comments:

1. Kudos to the OD camp for being reality based and taking such a level-headed view of these critical issues.

2. The author of these PESN articles has just been added to my Apocalypticon Hall of Fame.  Honestly, how can anyone read this stuff without detecting a distinct whiff (if not the overpowering stench) of civilization death wish?  I'm as unyielding a proponent of freedom of speech as anyone here, so I'm not about to say that that author or anyone else shouldn't have the right to say whatever he or she wants.  But that doesn't mean we should accept it uncritically.  Extraordinary demands STILL require extraordinary proof.

With regard to fertilizer produced from gas and starvation
I'd suggest reading Diet for a Small Plant by Lappe.  That
book is about 30 years old now and many others scream about
the unsustainable agriculture system we have.

My family, buys organic and local - no unnatural fertilizers and
pesticides.  We eat a predominately veggi diet. Those that
eat meat bio-concentrate the pesticides and other toxins
that we've put into the biosphere.  It takes aprox 2500 gal
to get one pound of beef - 10 calories of oil to make one
calorie of processed "food".  16 pounds of grain makes for
one pound of beef.  That grain could have fed a lot of people.

There is no shortage of food on this planet - it's just
that we're feeding it to aminals so that the rich can kill
themselves eating meat.  Read Diet For A New America or
The Food Revolution by Robbins or The China Study to find
out about the links between our western health problems and
what we eat.  Western health problems (cancer, clogged arteries,
obesity, osteoperosis) are primarily due to our high fat, high
protein, high dairy, low fiber diets.

My hope for surviving peak oil is that so much can be done
by a shift to a predominately veggie diet - both in terms of
health and less oil intensive industrial farming.

However, for decades we've already known about the salination
of our farm lands (reducing or killing productivity) as well
as polluting of aquifers. Because of that, and paving over our
best farm land, I'm not sure that we're going to take well to
peak oil.

I want to second Sealth's comments that the numbers in this article do not jibe with numbers I've seen elsewhere and therefore make this article seem factually unreliable.

The one that I am sure is wrong is their statement that 15% of US refining capacity will be offline for months.  I have followed this issue closely, and every other source states that 5% of US refining capacity will be offline.  This is a huge exaggeration, and it seems likely that the article is full of such exaggerations.  I don't think that it should be taken seriously.

The farmers can benefit two ways from a nitrate fertiliser shortage. They could skip buying it this year and cut their expenses. The lower yeild will drive up commodity prices disporprotionately just like it has for oil and natural gas so next year's income will be higher.